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CGT on UK homes for French residents


Kong
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I know very few people who have ended up paying CGT on houses they sold in the UK that were not their principle residency.Incidently an interesting way for Expats in France may be to register a bedroom (or indeed all your bedrooms) in your house for B&B with the mayor. You may then be able to claim that you have been living in 'job related accomodation' and not pay CGT. Nobody has ever tested it yet and it would be interesting to see the result.

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Well as this is a new proposal lets's hope the authorities close all the loop holes, and make it apply to all. Up till now nobody had to pay it. Funny thing about human nature, that people will encourage dodgy practices to benefit themselves but expect others to pay their whack.

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[quote user="Rabbie"]I welcome this change but why is GO waiting till April before bringing it in in stead of introducing it now[/quote]

The only reason I can think of is tax year although seeing people buy and sell at any time of the year it is not a logical answer.

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[quote user="Rabbie"]I welcome this change but why is GO waiting till April before bringing it in in stead of introducing it now[/quote]

I suspect that it is a change which will require primary legislation to bring it into effect. The easiest way to do that will be to include it in the 2014 Finance Bill.
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What I've seen the papers (so, of course, it's probably wrong) is that the charge won't apply for sales before April 2015, and even then it will only be tax on the gain since April 2015.

So any expats with UK property would be sensible to get it valued as of April 2015.

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It's funny to see the thread title couched in such terms of self-interest. What has been happening, while you've all been away, is that people with real money have bought lots of property in the UK, without any intention of living in it, either now or anytime in the future. They've bought it purely for investment purposes and in order to rent it and resell it later, at a stonking profit. This is the government's attempt to turn back some of that tide.

I can't imagine George Osborne giving a fig about the possible threepence-halfpenny he may get from the odd person living in France who still keeps a home in the UK, those people are just collateral damage. And may indeed remain unaffected altogether, as and when the threshold is announced. I don't think the gain on a three-bed semi in ruralshire is of the slightest concern. In fact, the speed at which the value of such types of property pales into insignificance versus what Georgie Boy is looking at, which is the London market where average prices recently shot up 8% in the space of a month.

And besides, it just levels the playing field: France taxes sales of property by non-residents, why shouldn't the UK?

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[quote user="You can call me Betty"]And besides, it just levels the playing field: France taxes sales of property by non-residents, why shouldn't the UK?

[/quote]

I know that's a rhetorical question, but at present UK residents pay capital gains tax on the sale of any and all assets if they realise a gain, and non-residents don't pay UK capital gains tax at all. They are going to have to write new tax rules to impose a CGT charge on sales of UK real estate by non-residents. But suppose you don't buy the house directly yourself: instead you put your money into a company in exchange for the company's shares, and the company buys the house. Then when you want to sell you don't sell the house: instead you sell the shares you own. So in addition to a tax charge on non-residents' UK real estate you'll also need a tax charge on non-residents' company shares where the value of the shares reflects the ownership of UK real estate.

In then becomes an interesting game of deciding how you charge tax on the sale of company shares, and how you collect the tax. If you want to avoid obvious loopholes it won't be easy to do.

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Please feel free to correct me if I have got things wrong.

1. The starting valuation date for the new tax is April 2015.

2. You will pay 18%/28% CGT in the UK depending on the amount of gain.

3. On your French tax return you will show the sale proceeds and any UK CGT paid so that French CGT and CSG etc can be applied as necessary.
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Another change that may well affect people moving abroad is the reduction next year from 3 years to 18 months for the period during which your previous home can remain your principle private residence for tax purposes, so avoiding CGT on its sale. In what is still a slow market in many places, that could well hit quite a lot of people who have had to move before being able to sell.
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[quote user="KathyF"]Another change that may well affect people moving abroad is the reduction next year from 3 years to 18 months for the period during which your previous home can remain your principle private residence for tax purposes, so avoiding CGT on its sale. In what is still a slow market in many places, that could well hit quite a lot of people who have had to move before being able to sell.[/quote]

A pedant writes ...... "principal" ......

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[quote user="Araucaria"][quote user="KathyF"]Another change that may well affect people moving abroad is the reduction next year from 3 years to 18 months for the period during which your previous home can remain your principle private residence for tax purposes, so avoiding CGT on its sale. In what is still a slow market in many places, that could well hit quite a lot of people who have had to move before being able to sell.[/quote]

A pedant writes ...... "principal" ......
[/quote]

I love it when people notice![:D]

So, is that blue vehicle of yours stationery (as in "background" for your post and not as in "unmoving?)

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That won't be much of a change for most people who live in France and have retained a house in the UK since private residence relief will be available for the period in which the house was just that.  If the house is let pending sale then letting relief is available too.  Plus a gain is taxable in France anyway so tax paid in the UK will be offset against the amount due in France.  Plus it looks as if properties will be rebased in April 2015.

This measure is really aimed at wealthy buyers of prime London property.   It's not a case of levelling playing fields or loopholes as the UK has had a deliberate policy of not charging CGT for nonresidents in order to attract inward investment.  I suspect this is as much LibDem appeasement and it wouldn't surprise me if once unshackled the Tories reintroduced taper relief.

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[quote user="Chancer"]

CGT on property gains is a voluntary tax anyway isnt it?

[/quote]

You mean you can volunteer not to pay it? I thought if you sold a house in the UK which was not your primary place of residence then you had to pay it?

That said it does seem that they are gong after the rich foreigners who were buying expensive properties as secondary homes.

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Yes my use of voluntary was a bit of a provokation!

Whilst I agree you "have to pay it on the sale of a second residence" unless things have changed there is no mechanism to withold it like the notaire does in France, you have to declare the gain on a tax return and then pay the amount when you get the bill, many seem to forget the first step and those that dont or who have perhaps been grassed up and then get a tax demand often move to Spain.

Same with selling a company for honkytonk millions of pounds, the system relies on the good faith of the person that owes the tax.

As I say unless things have changed.

So if they still are as I think they are how many of these foreign millionaires are going to fork over the money once they have definitively cut links with the UK?

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So what happens if nobody asks if it is your primary residence when you sell the house and you are no longer tax resident in the UK to the point where you have left and sent a registered letter to HMRC telling them that and also where you are currently tax resident? I am just wondering if these foreign millionaires buy the property through a registered company say in Dubai, Netherlands Antilles (or wherever) where they may be taxed at a much lower rate or not taxed at all. I bet a pound to a penny they have already found a way round it.

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